The Federal Government has scrapped the controversial broadband tender process and will instead form a new public/private company to build a national network, Prime Minister Kevin Rudd has announced.

Mr Rudd said the new fibre-to-the-home network would take eight years to build, cost $43 billion, and give 90 per cent of Australian households download speeds 100 times faster than they currently experience.

Unveiling the surprise plan today, Mr Rudd described the scheme as the single largest infrastructure project in the country's history and said it would create 25,000 jobs a year during construction, with 37,000 in the busiest year, over eight years.

Mr Rudd said the scheme was essential to boost long-term economic growth and set a path for the country's economic recovery from the global financial crisis.

"It is the most ambitious, far-reaching, and long-term nation-building infrastructure project ever undertaken by an Australian government," he said.

"Like the building of the Snowy Hydro, the building of the Sydney Harbour Bridge, this a historic act of nation-buidling."

The scheme will connect 90 per cent of homes to a network with speeds of up to 100 megabits per second, which Mr Rudd says is 100 times faster than what many homes have now.

The remainder of homes will get a service of around 12 megabits a second through wireless technologies.

The Government would hold a majority share in the company, to be part-owned by the private sector, with a joint $43 billion investment into the project over eight years.

Almost $5 billion already set aside by the Government under its Building Australia fund will go straight into the projects and the Government will also seek to raise money through "Aussie Infrastructure Bonds".

It will then gradually sell its share of the company five years after the project is completed.

Mr Rudd said the company, which will operate separately from the retail telecommunications sector, would inject a "new competitive force" into the telecommunications market.

"Today we draw a line under a decade of policy area and neglect," he said.

"This solves once and for all the core problem created when the previous prime minister privatised Telstra a decade ago without ever resolving the conflict of a private monopoly owning the network infrastructure and dominating the retail market."

Mr Rudd said the broadband tender process was being scrapped because none of the submitted bids offered value for money to the taxpayer, but said anyone was open to invest in the new company.

Telstra was dropped from the bidding process last December after the Government rejected its proposal, leaving several bidders including the Acacia consortium, Optus and Axia vying for the contract.

Communications Minister Stephen Conroy says he does not believe the private sector will feel as if they have been sidestepped by the Governnment.

"I think if you go and talk to the telco companies you'll find that there's a lot of interest in participating in this," he said.

The Government had originally said in 2007 the tender process would be finalised by mid-2008, with construction to begin by the end of last year.

It also said it would take around five years to build the network but Senator Conroy says extra time is needed because this project is more sophisticated.

"We're actually now touching everybody's homes as opposed to just building out to points in suburbs, that's why it's a longer implementation," he said.

The Government will being rolling out the network in Tasmania later this year while it conducts an implementation study into when work will begin in the rest of the country.

It has also released a discussion paper on how to reform telecommunications regulations.